U.S. District Judge Rules Detroit’s Bankruptcy Case to Proceed in Federal Court

by Sterling Beard

U.S. district judge Steven Rhodes overruled objections to the city’s bankruptcy filing today, and the case will now proceed in federal court, the Detroit News reports.

Rhodes also ruled that an automatic stay triggered by Detroit’s Chapter 9 bankruptcy filing extends to Detroit’s emergency manager, Kevyn Orr, Michigan governor Rick Snyder (R), and the restructuring team.

Plaintiffs in lawsuits combating the filing argue that it put earned pension benefits in danger and violates the Michigan Constitution, which states that accrued financial benefits from pension plans and retirement systems “shall not be diminished or impaired.”

It was on these grounds that Ingham County circuit judge Rosemarie Aquilina ordered that Orr withdraw the bankruptcy filing last week. On Monday, Rhodes said that the pension issue would be decided in federal court. Yesterday, a three-judge panel from the state’s Court of Appeals granted a stay of Aquilina’s ruling.

Detroit’s unsecured creditors are owed $11.5 billion, according to the Detroit News

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